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In part one of this two-part article, we introduced the insurance ecosystem and discussed how insurers can take advantage of this new business model. In part two, we’ll dive deeper into the benefits of an integrated digital ecosystem and cover some real-world examples of the insurance ecosystem in action.
Insurance Ecosystem Definition: The digital ecosystem can be described as the virtual version of shared office space between businesses that offer complementary products and services. It is an interconnected network of companies, people, data, and/or processes that are linked together by the shared use of digital platforms to achieve mutually beneficial goals.
Both companies and consumers benefit from the ecosystem. This business model allows insurers to leverage a variety of technologies from across the network to improve internal operations and enhance the customer experience.
The insurance ecosystem has the power to generate revenue, accelerate technology, and lower costs. At the same time, it increases opportunities for insurers to reach a wider audience and engage customers according to their needs and preferences.
Generate new sources of revenue.
By merging data within the ecosystem, you can better track and analyze information. This allows you to sell unique, integrated products and services that meet the demands of the modern consumer.
Speed up technology adoption.
As part of an ecosystem, your company can bypass many of the typical challenges of a systems upgrade. Taking advantage of the digital capabilities of other companies in the network, your organization saves the considerable time investment of an internal technology overhaul.
Lower costs by improving business processes.
In addition to streamlining workflows for efficiency, ecosystem integration reduces operational costs by outsourcing and merging your most time-consuming business processes and functions.
Connect with policyholders.
A core benefit of the digital ecosystem is the ability to reach and attract a wider audience through your network. These connections help insurers become active and supportive participants in the daily lives of consumers in ways that weren’t possible before.
Differentiate your organization.
Insurance companies have traditionally developed products based on limited consumer risk profiles. Until recently, policyholders could pretty much expect an identical experience with any provider.
However, the integration of new data sources expands your ability to create products and services based on life stages and other demographic factors. Instead of the cookie-cutter approach of the past, an ecosystem allows you to offer a more tailored, engaging experience, setting your organization apart from the competition.
There is no set model for an insurance ecosystem. You're free to set up a network of providers that meets the needs of your company as well as your policyholders. Today, many auto, homeowners, and health insurance companies are developing a variety of ecosystem arrangements.
Ecosystems give auto insurance companies access to tools for creating more accurate risk profiles and personalized policies. For example, many companies are now using telematics technology – sensors that can read, analyze, and report on a variety of metrics, from car condition to driver behavior. Rather than hiring in-house app designers or developing machine learning systems, insurance providers connect with independent telematics companies to incorporate the new functionality.
Consumers benefit from this type of auto policy because they can purchase the specific coverage they need, only paying for the times they need it. Thus, policyholders have more control over their premiums: the better (and fewer miles) they drive, the more money they save.
This type of ecosystem may include repair shops and fueling stations, where customers can enjoy discounts as a reward for their safe driving habits and impeccable car maintenance.
No longer restricted to a post-crisis position, the digital ecosystem enables insurers to deliver daily value through safety and prevention. With a network of trusted providers, insurers can facilitate home repairs, security alerts, and remote monitoring. Homeowners insurance providers can advise and, in partnership with tech companies, offer discounts on smart devices. In turn, policyholders receive a discount on their premiums by using the Internet of Things (IoT) for home maintenance and security.
Other potential value-adds include energy-efficiency consultations, home-buying assistance, and automatic shut-off services in the event of a fire, leak, or other dangerous conditions. Not only does the ecosystem network help reduce overall risk, building a set of services centered around a person’s home and personal safety can also boost brand affinity.
The ecosystem is not a new concept for this segment of the industry. For decades, health insurance organizations have connected with outside partners to offer screening tests, health advice, and other holistic services aimed at preventative wellness. In today’s digital ecosystem, consumers with wearables and other health/behavior-tracking devices have the opportunity to receive incentives from their insurance providers for making healthier lifestyle choices.
Ecosystem networks may include discounted online cooking courses, access to mobile apps, remote fitness coaching subscriptions, smoking-cessation products, and any other provider that helps create an environment of optimal health and wellness. As a result, healthy customers reduce the need for invasive, expensive, or risky procedures that can be avoided through proper prevention.
Consumers reap the financial benefits (lower premiums and discounted services), as well as health benefits when they take advantage of their provider’s ecosystem. Businesses with group health plans may also see cost savings, with the added bonus of increased productivity and employee retention by cultivating a healthier workplace.
The future of insurance is brimming with opportunity for insurers who are ready to move beyond the singular product-focus of yesteryear. As part of an ecosystem, you can outsource your more technology-heavy operations, propelling your organization forward with all the digital advantages of a modern business. With your unique network, you can differentiate your company by offering a eclectic array of supportive options centered around your customers’ needs and preferences.
To learn more about new digital trends in insurance, check out The Insurer's Guide to Going Digital eBook.
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Patricia is passionate about helping insurers continue to achieve success in a rapidly changing industry. She offers news, insights, and tips to help you modernize your organization, boost efficiency, and provide a superior customer experience for today’s policyholders.
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